Adding Up the Real Mary Kay Costs

December 26, 2018November 14, 2018

Written by Raisinberry

If you have been in Mary Kay for any length of time you are aware of a typical meeting involving a “scoreboard line up” of top sellers in your unit. The count up begins for what was sold, and generally anybody over $300 gets to come down front and tell their sales success. $300 a week in sales is supposedly a Sapphire Star Consultant, provided she ordered $1,800 wholesale during the quarter.

The problem is, there are very few real business women in Mary Kay. Your Director will have you split your sales 60/40 (60% back into products, 40% for expenses and profit if there is anything left over) as if that ratio has anything to do with actual accounting. You will note that even a weekly summary sheet does not track your real expenses and real profit. No, you are to record your 60/40 split as if the number remaining from the subtraction of your restocking amount reflected your actual profit. Nothing could be further from the truth.

In real business, the cost of doing business, every dime, is factored into its profitability picture. Mary Kay knows you will do such little business that real tracking of expenses against profit is futile. That’s why classes that are supposed to teach Money Management, are actually thinly disguised attempts to teach you to have full inventory, get all your MK debt on one credit card or loan, and pay it off with one set payment every month. This is taught as simple business management. Here’s the problem:

Your expenses continue. Your need to order new merchandise continues. Old products don’t sell, new products come out, and you eventually accumulate a bunch of unsellable products. If you are serious about your business, you will be at every meeting, every Career Conference, Every Leadership Advance, Every Pacesetters, Red Jacket Rally, Seminar, Pizza and Possibilities, Muffins and Makeovers, Meatloaf and Marketing, Omelets and Opportunities, ad infinitum.

You have start up inventory debt that hasn’t been cleared. You have reordering debt that hasn’t been cleared. You have travel and event debt that hasn’t been cleared, and accounting for all of it and the interest you are paying is a nightmare.When pressure comes to add more to it, like for finishing STAR Consultant or hanging on to Car Qualifications, you swallow hard, get a sick stomach and rationalize that soon you will be a director and pay it all off.

You won’t.

So since we are no longer willing to live in denial, let’s take a hard look at real profit and loss for one month…and I won’t pick July. Let’s take October.

Don’t glaze over…I know numbers make you nuts…but that’s why you are in this mess. I’ll keep it “general”.

Monthly sales: (Example of a typical scenario)

Week one – $320 sold

Cost of inventory – $160

Hostess losses ($75 for $25 coupon) – costs you $12.50

Travel- $8.00

Section 2- $5.00

Product giveaway for guests- $10

Website, Preferred Customer Program, meeting fee – $9

Interest on credit card debt – $3 (big range here, could be as high as $20 depending on your rate- Lets say $12 divided by 4)

TOTAL COSTS = $207.50

You sold $320, and you actually made $112.50. You thought you had a pretty good week. Better than most. And you profited $112.50 and that felt pretty good. Not the $160 they told you that you’d profit, but you have to spend money to make money, right? Except now it’s time for Fall Retreat, and your ticket price is $40 to $100 depending on where it’s held.

Next week, You attempt to repeat that $300+ week, but your class postpones. Some of your costs keep happening, like interest on the credit card, the meeting fee, preferred customer, etc. If you took a guest to the meeting and gave her a gift, that cost you something too. If you didn’t sell anything, you are now in the hole.

Week three you sell $500! Part of it contained that $400 roll up for $299.You made $99 on that roll up, NOT $200 because you discounted it. Then there are all the expenses all over again. You made another $200.00 from a double facial, lost some samples and product at $5 and of course your “gift with purchase” for the 2 of them at $7. Now add your “fixed costs” for the week, meeting, interesting, preferred customer, etc.

Week four you sell $250 and have the same costs again. At month end we can also add what you gave away in warm chatter samples, interviews that involved you picking up the tab, Other “fees” for Saturday trainings or marketing sessions, and your next wholesale order! Are you restocking ONLY what you sold? Chances are you are not! There’s new product to try, items you think you need more of, and so you charge.

After one month you have sold $1,070.

If you think like a Mary Kay consultant and not a business woman, you tell yourself you have 60% to order! Wow that’s more than $600 wholesale. Except a $600 wholesale costs you about $700 by the time you add in shipping and taxes. If you have $600 to spend, your order can only be $500, not $600!

If we use Mary Kay math, this woman profited 40%, or $428 on her sales. But does she really? Of course not because she had all those other expenses. And if she discounted ANYTHING during the month, she has no idea what her real amount of profit is. If she doesn’t count real costs, she is digging herself into a hole that will consume her, and she probably doesn’t realize it.

The money to run your “business” comes from somewhere. It doesn’t materialize out of a hat. And every week that you don’t sell at least $300 is costing you big time. Add all the “nothing is mandatory” but you better go, events… and you are frankly, screwed.

Mary Kay has been playing “Big Girls in Business” for 55 years. In 14 years, 11 as a Director, I never had a money management training class that talked actual cost and profitability, factoring debt and inventory management, and what obsolete product really costs us. When has what you have lost in product changes, packaging changes, and upgrades EVER been discussed?

And what has your TIME been worth? If a $300 week gets you $80 before your have your non mandatory events to pay for…what was your time worth? Meeting 2 hours, class 3 hours, Saturday guest event 2 hours plus calling, confirming and coaching… Don’t forget your time on social medial trolling for sales and showing everyone how wonderful #mymklife is.

Get the real picture? Now the accountants of this forum will be irritated that I didn’t spell it out exactly, but I want my words to resonate for the non-accountant mind. What does your logic and observation tell you? Are you in fact BETTER OFF financially for being in Mary Kay, or is the whole picture much more dire?

We can hope that some have broken even, but the vast majority are paying big time for this dive into “executive income for part time hours”.

Mary Kay Cosmetics prospers on our ignorance, hopes and dreams. This corporation is the quintessential opportunist, which, because it will not admit that these charges are true, will never cease to fuel the tide of antagonism against it.

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5 Comments

” real tracking of expenses against profit is futile” worse, it will make it clear how much money you are LOSING and you will quit. They don’t want that, so they don’t teach real business methods.

“every week that you don’t sell at least $300 is costing you big time” …. yup. If you don’t cover your expenses one week, you have to make even more the next week to compensate for it. But you won’t be taught to keep a running total of income versus outgo. Your director will keep you focused on one week at a time, not the money-losing big picture.

I looked at BBB.org, interesting that MK is not listed. Although, other MLM businesses are listed. MK “Independent Consultants” are listed. Many of whom did not deliver products or products were found out of date, and MK states that they have nothing to do with it. Interesting.

The BBB is just offline Yelp. Member companies can suppress negative reports and inflate their ratings and bad ratings and complaints are used against non-member companies to try to strong arm them into becoming a member to make the reports “go away.” They are not a credible source of information.

The very best thing you can do to help clear the Pink fog for a KBot is to help them set up a true business ledger/balance sheet. It must include ALL costs, and it would be wise to track their work hours as well. You can do this without judgement or criticism of MK. Be sure to offer to help review this with your friend every month to make sure it is complete.

As the losses begin to become obvious, ask the KBot how much they are willing to lose before they will consider another career option. Be sure to include a running loss cell and place that next to that the target loss cell in the spreadsheet. This will make it clear to them when that max dollar loss amount is reached.

If you are skilled enough, help them create a forecasting model that will show how many customers they will need to sign, per day, to achieve minimum wage by the end of year 1. Be sure to include rep churn (80% per year in MK I believe?). You can even include a “contact rate” by assuming only 3% of cold contacts will become customers or reps. So to get 3 new customers per week, they will need to reach out to 100 new people per week. And to replace the ones that leave, that will be another 80 cold contacts per week. That’s 180 new cold contacts per week (9,000 per year) to add 3 customers per week while replacing the 80% that leave.

You can’t use logic or reason with someone deep in MLM. However, when they see their losses jumping out at them from a spreadsheet of their own creation, it will only be a matter of time before they recognize the futility of it all.

All of this can be done respectfully and without judgement. The spreadsheet will do all the talking. You don’t have to be the bad guy…but they should soon discover who the bad guy really is.

I did all that for my BFF MLM junkie. Review your experience to figure out how many calls it takes to book an appointment, how many booked appointments are needed to see a live customer and make a sale, how many customers before she gets a recruit… Work backwards to figure out how many new contact phone numbers she needs each week to make those calls, then come up with a workable way to get that many contacts.

I held her attention for a week. That’s all.

Past the first 7 days the numbers just made her feel depressed, so she refused to look at them any more.

Instead she went back into la-la land where she could feel good about herself reading The Secret. Instead of listening to me she resumed listening to the likes of Joel Olsteen telling he that God was waiting to bless her if she’d only bee-lieve sincerely enough.

Then she blamed me for making her feel depressed, and refused to talk to me for a long time. MLM was her “ministry.” She wanted to surround herself with people telling her that she was “helping” women who didn’t have good opportunities, and that wasn’t me.

Never mind that I was the only person to show up when she sent invitations to a “hen party” where we could spend girlfriend time and try some new diet shakes. She always threw great (real) parties, but this was different and we all knew it. I knew what I was walking into and came prepared. It didn’t go well for the Director who didn’t like hearing the truth.

My BFF didn’t invite me to any more of those parties. And she stopped asking me my opinion about her MLMs. She wanted the truth, but she couldn’t handle the truth.